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Pipeline will transfer ethane from local area to Gulf Coast

January 12, 2012
The Herald-Star

CHARLESTON, W.Va. - Enterprise Products Partners of Houston, Texas, announced it will build a 1,230-mile pipeline to transport ethane from West Virginia, Pennsylvania, and Ohio to the Gulf Coast.

The company said it has received enough commitments to support development of the pipeline, which will have an initial capacity of 125,000 barrels of ethane a day and will be designed to eventually transport up to 190,000 barrels a day.

Enterprise has named the Appalachia-to-Texas pipeline the "ATEX Express."

Following Enterprise's announcement, West Virginia Commerce Secretary Keith Burdette said, "We still think there's enough gas to support probably two crackers in this region, maybe more."

A cracker converts ethane into feedstock for the chemical industry. Rob Alsop, Gov. Earl Ray Tomblin's chief of staff, said last month that attracting a cracker remains the governor's No. 1 goal.

Burdette said, "The numbers associated with ethane production (in the region) have grown dramatically in the past year. I think the last numbers we posted were in the 250,000- to 290,000-barrels-a-day range. We've now seen some industry estimates that double that amount or more.

"Based on the knowledge we have, we remain confident there's an adequate supply available to probably operate two of these (crackers). Of course the final call on that will be made by the companies themselves. They've been lining up suppliers. They know these figures in much greater detail. During the course of the last six months, they assumed this (pipeline) project would probably take place."

Royal Dutch Shell has publicly announced an interest in building a $1 billion to $2 billion ethane cracker in Appalachia and a company representative has said Shell will announce a location early this year. Burdette has said another multinational company also is interested.

Last month Burdette said he believes three West Virginia sites are in the running for a cracker.

Developments are occurring quickly in the natural gas-rich Marcellus shale in West Virginia's Northern Panhandle and in southwestern Pennsylvania. Drilling also is underway in the Utica shale in Ohio.

Plans have already been announced to transport some of the region's ethane to Canada and to the Gulf Coast via the East Coast.

There are several crackers on the Gulf Coast. There aren't any in Appalachia.

Michael Creel, president and chief executive officer of Enterprise's general partner, said in a prepared statement announcing the pipeline project, "The willingness of shippers to commit to a term of at least 15 years reflects the long-term potential of shale development in the Appalachian region and provides us with the assurance necessary to build the midstream infrastructure that will facilitate further development of this important domestic resource."

Enterprise said the pipeline will originate in Washington County, Pa. The first leg will involve construction of 595 miles of new pipeline to Cape Girardeau, Mo., closely paralleling an existing Enterprise pipeline.

The existing pipeline crosses the tip of West Virginia's northern panhandle.

Enterprise said that at Cape Girardeau, it will reverse a 16-inch diameter pipeline and place it into ethane service.

"By utilizing an existing pipeline and following an existing right-of-way for the section to be constructed, ATEX Express offers a cost-effective and timely solution that also minimizes the project's environmental impact," the company said.

Enterprise said that at the southern terminus of the ATEX Express, it will construct a 55-mile, 16-inch diameter pipeline to provide shippers with access to the company's natural gas liquids storage complex at Mont Belvieu, Texas, "giving them direct or indirect access to every ethylene plant in the United States."

The company said its representatives are working with residents, landowners and community leaders along the proposed pipeline route, "providing information about the project, conducting surveys and negotiating right-of-way agreements. ATEX Express is expected to begin commercial operations in the first quarter of 2014."

Enterprise said, "This project is expected to directly create approximately 4,000 jobs during and after construction, which will increase the need for local goods and services and generate incremental state and local tax revenue." In addition, jobs will be created to increase production in the Marcellus and Utica basins, Enterprise noted. The company said jobs also will be created by new and expanded ethylene plants in the United States.

Ethane for use as a chemical industry feedstock currently has a huge price advantage over crude oil-based derivatives.

There is a daily demand for 955,000 barrels per day of ethane within the Gulf Coast petrochemical market and demand continues to increase, Enterprise said.

Rick Rainey, an Enterprise spokesman, said the pipeline project is part of the company's capital budget. He said Enterprise will use a combination of debt and cash on hand to finance the project. He could not immediately put a price tag on it.

Several months ago Chesapeake Energy Corp. committed to ship 75,000 barrels of ethane a day on the pipeline, Rainey said. Since then, other producers have also committed to use the pipeline.

Rainey would reveal neither the names of the other companies that have made commitments nor the total number of barrels of ethane per day that has been committed. "Suffice it to say they stepped up to the plate for enough capacity commitments to allow us to move forward," he said.

Enterprise is not in the business of providing infrastructure like a cracker to the petrochemical industry. "We're not in that business, the petrochemical side of it," Rainey said. "As a midstream provider, our job is to provide the infrastructure necessary for these producers to allow them to get their product to the most attractive markets.

"In this case, we've been working for over a year to find out what they (the producers) are willing to support and the prevailing thought was, the most attractive market is along the Gulf Coast," Rainey said. "Their desire is to build a pipeline in a timely and economic fashion. That's where we stepped in. Our project is independent of any cracker project. We simply went out to see who would be willing to commit to a long-term contract to support this (pipeline) project.

"Who knows? If a cracker is built up there, so much the better because we'll already have infrastructure in place to support that, too. Our responsibility is to make sure we provide solutions the producers need to maximize the value of their product and get it to the most attractive markets. Right now that is the Gulf Coast."

Enterprise has 50,000 miles of pipeline nationwide, including pipeline in many other shale regions, Rainey said.

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